Final Review Inventory Control & Material Management

1. Welcome to class. We will
begin shortly

2. Midterm Review

3. Inventory can be defined as goods that
are either inputs for production,
finished products, or products that are
in the process of being made.

4. Replenishment planning shouldn’t
consider the anticipated lead time for
each order.
False

5. To calculate an item fill rate, you need to
know how many units of inventory were
ordered by you as the purchaser, and how
many units were ordered by your
customers.
True

6. What is radio frequency identification?
Microchip technology that can track
inventory

7. The economic order quantity model
seeks to ensure that the right amount
of inventory is ordered per batch

8. Principal types of forecasts are: inventory
carrying, ordering and setup, expected
stockout, and in-transit inventory.
False

9. What does the economic order quantity
calculate?
The optimal level of inventory to order
from suppliers to minimize ordering costs

10. Independent demand is related to the
demand for other items too.
False

11. Which of the following is NOT an
example of an automated inventory
control system?
Physically counting inventory on hand

12. Related to the importance of Inventory,
the key to every organization's success is
right product, right place, right time, and
right quantity.

13. Without a proper replenishment plan,
organizations may put their business at
risk.
True

14. The objective of inventory management is
to strike a balance between inventory
investment and customer service
True

15. All of the following are benefits of a just-
in-time (JIT) system EXCEPT:
Inventory arrives just as it is needed.
It reduces the potential for spoilage.
It improves a company's cash flow
It ensures the company never runs out of
product

16. Principal types of demand are: cycle stock,
work-in-process, inventory in transit,
safety stock, seasonal stock, and
anticipatory stock.
False

17. Among different types of costs
associated with inventory, the costs of
obtaining purchase approvals are
related to right place

18. A reorder point (ROP) is a specific level at
which your stock needs to be replenished.
In other words, it tells you when to place
an order so you won’t run out of stock
True

19. Inventory management has no impact on
any of the organization’s functions, sales,
marketing, operations, procurement,
finance, and accounting.
False

20. Among different types of costs associated
with inventory, the opportunity cost of the
investment tied up in inventory is a(n)
carrying cost

21. A demand forecast helps you determine
how much inventory you should keep in
your supply chain to meet your customer
demand
True

22. The purchase-order lead time is the
________.
time between placing an order and its
delivery

23. Safety stock: The amount of extra
stock, if any, that you keep in your
inventory to help avoid stockouts
True

24. Which of the following statements is true
of just-in-time (JIT) purchasing?
In JIT purchasing, raw materials (or goods)
are purchased so that products are
delivered just as needed for production or
sales.

25. Quantity Discount is also known as
“volume discount.”
True

26. When demand exceeds supply the
organization will incur losses of sales
due to unavailability of the products.
True

27. Demand forecasting is not a counting
system that can be utilized when
counting inventory.

28. Too much or too less stock can hamper
your organization’s growth.
True

29. Seasonal inventory is not manufactured
during the pre-season to ensure that
enough of the product is available during
the peak season.
False

30. A company needs to generate the
forecast for every product in business
True

31. In a pull inventory management
approach, production doesn’t start on
receipt of a customer order
False

32. Having inventory allows for a smoother
operation in most cases since it alleviates
the need to create product from scratch
for each individual demand.
True

33. Excess inventory can lead to spoilage,
obsolescence, and damage.
True

34. ________ determine the replenishment
policies (when and how much) of these
inventories. This course mainly covers the
operational decisions on replenishment.
Operational decisions

35. Safety or Buffer Stock is NOT the inventory
needed to cover any uncertainties in
demand, supply, production, etc.
False

36. The Total Cost equation is typically NOT
used to make the decisions of how much
inventory to hold and how to replenish.
False

37. The Shortage or Stock-Out Costs are
those costs associated with not having
an item available when demanded.
True

38. We seek the Order Replenishment Policy
that MAXIMIZE these total costs and
specifically the Relevant Total Costs.
False

39. Reasons to hold inventory include:
Cover process time, Allow for uncoupling of
processes, Buffer against uncertainties such
as demand,supply, delivery and
manufacturing.

40. Balancing supply and demand is a
constant process
True